Friday, August 19, 2011

Chilean Central Bank Holds Interest Rate at 5.25%

The Banco Central de Chile held its monetary policy interest rate unchanged at 5.25%. The Bank noted concerns about the global environment, including slower growth in the EU and US, as well as and increase in "financial volatility and risk aversion". On its own economy the Bank said: "Domestically, output, demand and labor market figures are evolving strongly and are showing signs of moderation at the margin. However, in the case of product and demand,such moderation has been less than foreseen in the baseline scenario of June's MonetaryPolicy Report. CPI inflation has hovered around 3% y‐o‐y while measures of core inflationremain bounded. Inflation expectations show a significant decline and are close to the target."The Chile's central bank previously also held the monetary policy interest rate unchanged at 5.25% at its July meeting. The Bank last raised its monetary policy interest rate by 25 basis points to 5.25% at its June meeting this year. The Bank said core inflation is holding around 3%, which is in the middle of the Bank's 2-4% inflation target. Chile reported annual consumer price inflation of 2.9% in July, compared to 3.4% in June, 3.3% in May 2011, and 3.2% in April this year. The Chilean economy grew 8.4% in the first half of 2011, driven by strong domestic demand; full year GDP growth is expected around 6.5%, while inflation is seen around 4% by the end of the year.